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A Free market solution
Energy Politics
Energy Economics
Summary

A Free Market Solution Part 1

This is about using the power of the free market to provide to solution to oil imports and global warming.

The next president should appoint a commission, of wise people, with no significant financial interests in energy, to come up with the most effective and least costly means to reduce greenhouse gases.

This is what they would come up with:
An assessment against fossil carbon release and then returned equally to all tax filers.
Here’s why:

1. It avoids a tax that to many people means wasteful spending.
A carbon tax would do many of the same things an assessment would do, but would not be as efficient (motivate) and certainly would not be popular.
2. A carbon tax is regressive, since low income people spend a greater portion of their income for energy.
A carbon tax would be especially unfair and unpopular with lower income people.
3. An assessment does not make reduction of energy use mandatory.
Free choice is always desirable and would motivate more people. Those who chose not to participate can feel free not to as they will be paying others to reduce their use and will pay for renewable fuel development.
4. As non-fossil energy comes on line, the assessment becomes less until it disappears.
An assessment is temporary and disappears as fossil carbon emissions drop.
5. It would be inexpensive to collect, since it would involve the few oil or coal companies and they already collect the necessary information.
6. It would cost very little to pay back, since a tax filing system is already in place.
7. An assessment would be fair, if the assumption is made, that all people are born equal and have an equal stake or equal rights to a clean environment.
8. Most important, an assessment would allow free market principles to work.
Why would anyone think congress would make the best decisions on what energies to support with grants, subsidies, tax breaks or mandates. The reason an assessment would work is the complete transparency and everyone can choose whether to be involved and those risking their investment money will make more knowledgeable decisions than congress. 

Energy politics
The number of various renewable energy sources is large.
Biomass, geothermal, nuclear, tidal, wave, wind, solar and?? will all contribute.

The number of ways liquid fuels could be replaced by electricity is large.
Plug in hybrids, heat pumps, and manufacture of nitrogen fertilizers, etcetera.

There are almost an infinite number of ways to conserve energy.
Higher mileage cars and trucks, more efficient, lighting, appliances and even simple things like insulation and weather stripping to name a just a few.

On top of this are several ways to sequester carbon.
Biomass can be buried or CO2 extracted from the air and sequestered. Other ways can serve more than one purpose such as biochar as fertilizer or CO2 for oil extraction from old fields.

No one knows the outcome of this extremely complex interaction of the various energy sources, conservation, efficiencies and offsets. Good government leadership would trim and eventually cut all subsides, grants, tax credits and mandates and leave the free market to sort this out. This would reduce taxes and lead to a much smaller increase in energy costs.

Most government activities in the energy field have not been very helpful. A recent example of costly government interference is the ethanol subsidy. Federal agricultural and ethanol subsidies, and in some cases additional state and local aid, have resulted in the cost of ethanol BTUs close to and sometimes exceeding the BTU value of expensive imported oil. Since any ethanol production is and will be far too small to have any effect on oil prices, the only thing the consumer will receive is higher food prices.

Obviously most farmers’ benefit from ethanol. Corn prices have almost doubled and corn acreage has increased reducing acres available to other crops, often increasing their value. When corn was less than $2, and imported oil was over $70, investors paid for some of these ethanol plants in one year.

Ethanol is used to oxygenated gasoline and replaces MTBE.  MTBE was added to increase octane, but was found to contaminate water supplies. While a 10% ethanol blend has value beyond the BTUs as an oxygenate, the ethanol in E85 or flex fuel vehicles must be evaluated by the energy alone. The ethanol energy gain is very small and the cost in subsidies and food is great.

The politics begins with the Iowa caucus, for those who don’t know, is the biggest corn producing state. Political candidates are not critical of ethanol in Iowa.

If we start now, it will take 20 to 40 years to get to clean energy. We can retire coal power plants, fossil fuel extraction, and related production equipment when it is wore out. If we wait, we have the addition cost of retiring unworn equipment, costs of greater environmental damage, and a quicker more expensive path to renewable energy.

Fossil energy extractors and some of those receiving government grants and subsidies will object and provide funding for its defeat. Some politicians may also view this as a loss of some of their power or influence.

An assessment should be bipartisan. It should be appealing to those on the right, since it does not make mandatory energy reductions and is not a tax. It should appeal to the left since it would benefit low energy consumers, which are the poor, and large segments of the middle class that would like to conserve.

Some politicians feel the U.S. should not do anything unless China and India control their carbon emissions. However, it is the developed economies have been doing the polluting and can best afford to develop renewable energies. Until the developed countries achieve a carbon footprint no larger than the undeveloped countries, they have no reason to complain. China uses less than 1/5 the per capita energy as the U.S., India less than 1/10.

Energy Economics
The coal burned to produce 1 kWh of electricity costs about 2 cents. Even if the cost of coal doubled or tripled it would not make a big difference in your electric bill, since most of the bill is for the construction, transmission, distribution and administrative costs. While there is an estimated 400 years of coal reserves, the high quality, easily mined coal is gone. Future coal mining will be for lower quality coal, deeper mining and greater environmental degradation as in mountaintop removal.

Wyoming coal costs around $20 per ton, I think less than $10 at the pit. The BTUs in 1 ton of coal equals around 172 gallons of oil. At $82 per barrel, 172 imported gallons would cost $344. This makes oil generated electricity very expensive, as well as gas which can often substitute for oil.

Coal generated electricity, including construction costs, can be produced for as little as 5 cents per kWh. Wind generation at a good site is about the same. It is the new transmission and backup power that makes wind more expensive. Coal and wind generation can be built for about $1500 per kW. Backup generation, which is usually gas-generated electricity can be brought on line almost instantly and is currently being built for about $500 per kW. Gas generation power plants are cheap to build, but expensive to operate.

Energy payback includes all energy used in the mining, manufacture, and construction of a facility built to produce electricity. Only after the energy payback will the facility be producing a net positive amount of energy. The payback for wind at good locations appears to be in only 4 to 8 months. After the payback, since the wind is free, the only energy cost is maintenance and site cost. This is why it is important through electronic metering, hybrid cars, etcetera, to utilize this energy as efficiently as possible.

You have likely heard claims that a plug in car can be run on an electrical equivalent of 75 cents per gallon. This is because coal so inexpensive compared to gas or diesel. If it were wind energy, it would still be close to 75 cents, but with essentially zero carbon emissions.

Electrical motors are close to 90% efficient, while a gas powered car might average around 20%. An internal combustion engine can run up to 35% efficient, but is usually operated at rpms and speeds where efficiency is much less. The main reason hybrids will get better mileage is, that by combining electric with gas, the gas engine can operate at higher efficiencies.

Plug in hybrids can average over 100 mpg, the reason is most of the mileage will be electricity at the electrical equivalent of 75-cent per gallon gas. If we want to convert some of our car and light truck transportation to hybrid-electric, we will have to put a floor on the cost of oil, Otherwise, who would buy these more expensive vehicles and be stuck with the higher price the next time OPEC decides to drop oil prices.                                      

A recent proposal to heat agricultural cellulose with limited oxygen (pyrolysis) will produce gas, tar and a kind of charcoal, referred to as agrichar or biochar. This technology is exceedingly interesting since it serves not only as carbon offset, but also as a fertilizer and soil amendment. As with the hybrid car, this makes for a good way to transition out of fossil fuels. That is, it allows us time to continue using some fossil fuels with offsets until other renewable energies

To Summarize
This solution will work; the only question becomes the size of the assessment. The commission should be ongoing so as to be able to adjust rates according to latest scientific findings and economic conditions. The assessment would reduce taxes by eliminating subsidies, grants, and tax credits. It will cost little, if started now, but like SS or Medicare, will become increasingly expensive if we wait until we have to pay for environmental damage and ‘a hurry’ up to renewable energy. An assessment could also include national security costs, if savings can be shown.

There are actually 3 good reasons we will have to quit using fossil fuels.
Reasons                                        Date of major effect
1. Balance of payments or strategic interests  2008-2010
2. Depletion of fossil oil                                   2015-2030
3. Global warming                                             2009-2030

Many people might argue that most of these effects begin hurting years ago. The dates I used are dates where I think most people will have to acknowledge the potential damage. Everyone agrees that fossil fuels are finite and eventually we will have to change. The only question is the time and the mix of renewable energies. 

Read on - Learn more about some of these topics-Part 2

A Tax?                             Biomass                      Energy in 2040            Free Market                    Carbon Offsets            2040 Energy Sources   Cap & Trade                    Energy Payback           Beyond 2040      Economic Costs           Electrical transmission    Getting Personal Overshoot                        Energy Waste              Recycling                  High Tech Fixes               Energy in 2040         Subsidizing the Wealthy  

Summary, Energy Facts and References - Part 3

20 Years to Clean Energy? - Part 4